Monday, March 30, 2009

Africa's hopes for the G-20 meeting

Writer Edward Harris does a great job in describing the impact of the global economic recession on Africa. In his Associated Press story, Harris describes how the recession effects underdeveloped nations differently, and what they hope to see from the upcoming G-20 meeting.

As leaders of the Group of 20 industrialized nations prepare for an April 2 summit in London to hash out a coordinated economic plan, Africans and international activists are hoping that rich country leaders turn their attention to poor nations, too. Unlike the narrower Group of Eight forum, Africa has a seat at the G-20 in South Africa.

Africa's exposure to the global meltdown is fundamentally different to that in developed countries: its economies are mostly based on hard cash, so lack of bank liquidity that translates into lower lending isn't the main problem in Africa. And few Africans hold mortgages, so there's no subprime mess.

Most African countries are instead suffering from depressed global demand for the natural resources that provide the lion's share of their incomes.

Also hurting the continent:

— The drying up of crucial direct investment from overseas.

— A drop in remittances sent back home from African emigres.

— A stampede of foreign money out of fragile local stock exchanges as overseas investors seek safer waters.

— An expected drop in direct aid from richer nations now preoccupied with their own people.

While Africa is projected by the International Monetary Fund to squeeze out economic growth of about 3 percent in 2009 even as the global economy recedes for the first time in years, that's only about half of what Africa has seen recently, and it's too little to halt the spread of poverty.

ActionAid, a South African charity, says the global economic downturn translates into about a $50 billion — or 10 percent — drop in income for Africa by the end of the year.

"Although developing countries didn't make this crisis, it has become all too clear that they are in the firing line when it comes to suffering its worst effects," says Claire Melamed of ActionAid.

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